United Community Banks Reports First Quarter Results

EPS of $0.82, Return on Assets of 1.62% and Return on Common Equity of 15.4%

United Community Banks, Inc. (NASDAQ: UCBI) has announced that net income for the first quarter reached a record $73.7 million and pre-tax, pre-provision income was $81.6 million. The quarter benefited from an allowance release of $12.3 million, as economic conditions and forecasts continue to improve. Diluted earnings per share of $0.82 for the quarter represented an increase of $0.42 or 105%, from the first quarter a year ago, and represented an increase of $0.16 or 24% over the fourth quarter of 2020. On an operating basis, United’s diluted earnings per share of $0.83 was an increase of 102% over the year ago quarter. United’s GAAP return on assets (ROA) was 1.62% and its return on common equity was 15.4% for the quarter. On an operating basis, United’s ROA was 1.65% and its return on tangible common equity was 19.7%. On a pre-tax, pre-provision basis, return on assets was 1.83% for the quarter.

Chairman and CEO Lynn Harton stated, “We continue to have strong performance across our businesses and markets, driven by an improving economy, southeastern markets that are outperforming national averages, and great execution by our bankers. Loan growth, while slower than the previous two quarters, continues to be positive and deposit growth continues at a strong pace. Credit results were outstanding and we believe the record stimulus, strong liquidity levels of consumers and businesses, and pent up demand has the potential to deliver strong economic growth for several quarters.”

Total loans increased by $308 million during the quarter—impacted by a $237 million increase in SBA Paycheck Protection Program (PPP) loans. During the quarter, United funded nearly 5,100 loans totaling $518 million, and had $311 million in PPP loans forgiven. Excluding the effect of PPP loans, core organic loan growth was 3% annualized. Core transaction deposits grew by $948 million during the quarter, or 33% annualized, and United’s cost of deposits decreased by 3 basis points to 0.14%. The net interest margin decreased by 33 basis points from the fourth quarter due mainly to a $9.5 million decline in the recognition of PPP fees, as well as $1.8 million less purchased loan accretion. Excluding these items, the net interest margin decreased by approximately 7 basis points from the fourth quarter due to a combination of factors, including lower overall market rates and increased liquidity.

Mr. Harton concluded, “We are excited about the ongoing opportunities in our markets and look forward to the rest of 2021. I also want to recognize our entire team for their performance. Earlier this quarter, Forbes recognized United on its 2021 list of the 100 Best Banks in America for the eighth consecutive year. Forbes’ ranks the banks based on growth, credit quality and profitability and United was again a standout. I am incredibly proud of our employees who make this type of recognition possible through their tireless dedication to our customers, our culture and fulfilling our performance mission.”

First Quarter 2021 Financial Highlights:

  • Net income of $73.7 million and pre-tax, pre-provision income of $81.6 million
  • EPS increased by 105% compared to last year on a GAAP basis and 102% on an operating basis; compared to fourth quarter 2020, EPS increased by 24% on a GAAP basis and 22% on an operating basis
  • Return on assets of 1.62%, or 1.65% on an operating basis
  • Pre-tax, pre-provision return on assets of 1.80%, or 1.83% on an operating basis
  • Return on common equity of 15.4%
  • Return on tangible common equity of 19.7% on an operating basis
  • A release of provision for credit losses of $12.3 million, which reduced the allowance for loan losses to 1.09% (1.18%, excluding PPP loans) from 1.20% in the fourth quarter
  • Loan production of $1.5 billion, resulting in core loan growth of 3%, annualized for the quarter, excluding the impact of $518 million in new PPP loans and $311 million in PPP loans being forgiven
  • Core transaction deposits were up $948 million, which represents a 33% annualized growth rate for the quarter
  • Net interest margin of 3.22% was down 33 basis points from the fourth quarter, mainly due to the impact of accelerated PPP fees during the fourth quarter
  • Record mortgage closings of $666 million and mortgage rate locks of $993 million, compared to $388 million and $801 million, respectively, a year ago
  • Noninterest income was up $3.3 million on a linked quarter basis, primarily driven by higher mortgage loan gains and related fees
  • Noninterest expenses decreased by $11.3 million compared to the fourth quarter mostly due to funding for the United Community Bank Foundation of $8.5 million in the fourth quarter
  • Efficiency ratio of 53.6%, or 52.7% on an operating basis
  • Net recoveries of $305,000, or one basis point as a percent of average loans, down 6 basis points from the fourth quarter
  • Nonperforming assets of 0.30% of total assets, down 5 basis points compared to December 31, 2020
  • Total loan deferrals of $48 million or 0.4% of the total loan portfolio compared to $71 million or 0.6% in the fourth quarter
  • Quarterly common shareholder dividend of $0.19 per share declared during the quarter, an increase of 6% year-over-year
  • Successfully completed the operational conversion of Seaside during the quarter